ICYMI | The Pitch: 10 Actionable Investing Ideas From Hedgeye Analysts

12/01/21 12:18PM EST

Dear Investor,

We just hosted a powerful, 60-minute lightning round edition of “The Pitch” featuring 10 Hedgeye analysts “pitching” their favorite stock ideas to Hedgeye CEO Keith McCullough.

If you’re interested in constructing an alpha-generating, long-short equity portfolio, this webcast is a must-watch.

https://cdn.jwplayer.com/players/VPUJSS51-x1Hp06Vr.js?sig=a69d5347b861ba08f79343a4fd9a76a8&exp=1638296501

FYI -- we transcribed the core thesis of each analyst’s best idea (scroll to the bottom to see) and included timecodes immediately below for you to watch the full presentation on each idea.

Here’s the list:

  • Gaming, Lodging & Leisure analyst Todd Jordan: LONG WYNN (00:30 – 5:21)
  • Retail analyst Brian McGough: LONG RH (5:22 – 11:16)
  • Financials analyst Josh Steiner: LONG COIN (11:19 – 17:38)
  • Communications analyst Andrew Freedman: SHORT FUBO (17:41 – 23:58)
  • Consumables analyst Howard Penney: LONG CHEF (23:59 – 29:01)
  • REITs analyst Rob Simone: AMERICAN HOMES 4 RENT (29:02 – 34:38)
  • China analyst Felix Wang: LONG NTES (34:38 – 40:45)
  • Healthcare analyst Tom Tobin: LONG AMN (40:46 – 47:12)
  • Technology analyst Ami Joseph: LONG XM (47:13 – 53:35)
  • Industrials analyst Jay Van Sciver: SHORT ROL (53:36 – 59:40)

In addition, Keith (putting on his former hedge fund portfolio manager hat) provides a critical risk management overlay to these fundamental long-short ideas.

It’s a must-watch.

P.S. We recently announced a brand-new Sector Pro “create your own research bundle program.” Pick 3, Pick 5, Pick 7 Sector Pro products and get a free year of our Hedge:IQ, Elite Pass, Platinum All Access Pass.

Questions? Contact Jamie Bruno at support@hedgeye.com.

ICYMI | The Pitch: 10 Actionable Investing Ideas From Hedgeye Analysts - cym

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Gaming, Lodging & Leisure analyst Todd Jordan: LONG WYNN

Todd Jordan: We’re talking about Wynn (WYNN). The theme of this presentation is “best in class.” WYNN has the best properties in every market they operate in. They’ve outperformed in recoveries in Las Vegas and Macau historically because the best in class always outperforms when its on sale. Looking at the valuations WYNN is at the low end of its range and trading at a discount to the whole Gaming, Lodging & Leisure sector. Pretty attractive from a valuation perspective. (00:30 – 5:21)

RETAIL ANALYST BRIAN MCGOUGH: long rh

Brian McGough: My stock here is Restoration Hardware (RH). I know, shocker. This is a name we went long at $36 and it went to $600. That was the first wave of getting paid. That was the company going from small galleries to large galleries. It was a huge ROIC improvement event. Now the company is moving towards building an ecosystem around the rich. Over a tail duration (3 years or less), we are so far ahead of consensus on our top line numbers. This strategy (which I’ll discuss more) is ultimately worth over $2,000 per share. (5:22 – 11:16)

FINANCIALS ANALYST JOSH STEINER: LONG COIN

Josh Steiner: We’re talking about Coinbase Global (COIN). This is the most important slide. It overlays internet users from 1990 to 2000 against crypto users from 2014 to 2024. The growth in crypto adoption is tracking perfectly the growth in internet adoption. The outlook is that we’re converging on a billion crypto users in 4-5 years’ time, a 5 to 10 fold increase. Coinbase is the quintessential pick and shovel play. You don’t have to bet on a single cryptocurrency to play on the entire space growing along this internet adoption curve over the next 20 years. (11:19 – 17:38)

COMMUNICATIONS ANALYST ANDREW FREEDMAN: short fubo

Andrew Freedman: I’m going to pitch a short on the worst business model I’ve ever seen. It’s FuboTV (FUBO). It’s a virtual multivideo programing distributor that a commodity service with poor unit economics. They pay out over 100% of the subscription back to the media companies. Costs per subscriber are going up 5-7% per year. At the same, you have intense competition and switching costs are very low. Ultimately, I think this stock is a zero. I just think this money will never make any money. We obviously have to play our catalysts very closely. (17:41 – 23:58)

CONSUMABLES ANALYST HOWARD PENNEY: long chef

Howard Penney: I’m going to go long Chef’s Warehouse (CHEF). They serve independent chefs and owners and operators of many different independent restaurants, caterers, fine dining establishments, hotels, cruise lines, schools, you get it. There’s a recovery story that hasn’t played out in CHEF’s business yet. They’re seeing about 1/3 of their business still opening up. That’s part of the reason why they had a great quarter. I like the fundamentals. There’s a nice trend in revenues and EBITDA revisions and I fully expect that to continue here. (23:59 – 29:01)

REITs analyst Rob Simone: long amh

Rob Simone: Long AMH is all about an accelerating rate of change and consensus estimates that are just way too low. The way to think about residential and specifically single family rentals is home pricing appreciation leads leasing spreads by 2-3 quarter which leads actual rental rate growth that then shows up in AMH in another 2-3 quarters. This has an 80% correlation. The consensus estimates are also absurdly conservative. There’s a strong case to be made for a rate of change acceleration into 2022, maybe even 2023 on all the key metrics. This is one of the most interesting Tail duration calls in my space. (29:02 – 34:38)

China analyst Felix Wang: long ntes

Felix Wang: NetEase (NTES) is the second largest video game developer and publisher in China, only behind Tencent. New game releases like “Harry Potter: Magic Awakened” and “Naraka: Bladepoint” have exceeded expectations and revitalized growth potential. This new Harry Potter game has the ability to cater to a new casual gamer segment. I expect NetEase’s domestic market revenue share to continue to rise helped by this game. Naraka: Bladepoint is a battle royale PC game. NetEase’s PC game revenue has soared in Q3 to the highest revenue growth rate since Q2 2019. (34:38 – 40:45)

HEALTH CARE ANALYST TOM TOBIN: long amn

Tom Tobin: I’ve been doing a lot of work on how to play Healthcare labor scarcity. I think AMN Healthcare (AMN) could trade into the high $100s. The reason to think this stock is misunderstood is Wall Street thought 2021 was going to be the peak, with down revenue in 2022. What’s really becoming clear is how permanent or semi permanent this labor inflation is. JOLTS and Quits are up and to the right. Hires and openings is near all-time highs. Medical demand is starting to accelerate, partly because people stayed away from the doctor for so long. (40:46 – 47:12)

Technology analyst Ami Joseph: long xm

Ami Joseph: Qualtrics (XM) is doubted even as its proven it can sustain itself as a better than 30% grower. Qualtrics dominates its category while significantly adds to the number of features released each quarter. Some people say, ‘Oh it’s just survey software.’ But now the company has insights and analytics on customers, employees, brands and products etc. So they’ve made themselves into something much better. What will this company become? Technology is all about supply growth. The more supply you put into the market the more demand you create. We really like this curve for Qualtrics. (47:13 – 53:35)

INDUSTRIALS ANALYST JAY VAN SCIVER: short rol 

Jay Van Sciver: I’ve got a new short idea. It’s Rollins (ROL). The company is in a mature and fragmented industry. What I like about it is that it has a clear series of catalysts. Those catalysts are already in motion. So what is Rollins? It’s a pest control company, the Orkin Man. It’s supposed to be a growthy roll-up. Any time you have a mature industry like this that’s a roll-up there’s an issue there. Investors think they’re getting underlying deal growth plus organic growth that’s supposed to be mid-single digit. But, for some time, it’s been really difficult to get the numbers to match the narrative. They just don’t. (53:36 – 59:40)

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